Because postage rates are rising, Home Decorator magazine plans to maximize its profits by reducing by one half the number...
GMAT Critical Reasoning : (CR) Questions
Because postage rates are rising, Home Decorator magazine plans to maximize its profits by reducing by one half the number of issues it publishes each year. The quality of articles, the number of articles published per year, and the subscription price will not change. Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted.
Which of the following, if true, provides the strongest evidence that the magazine's profits are likely to decline if the plan is instituted?
Passage Analysis:
| Text from Passage | Analysis |
| Because postage rates are rising, Home Decorator magazine plans to maximize its profits by reducing by one half the number of issues it publishes each year. |
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| The quality of articles, the number of articles published per year, and the subscription price will not change. |
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| Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted. |
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Argument Flow:
The argument presents a business plan step by step: first the problem (rising postage costs), then the solution (cut issues in half), followed by constraints (keep quality, articles, and price the same), and finally supporting evidence (research shows no customer loss).
Main Conclusion:
Home Decorator magazine can maximize profits by cutting its publication frequency in half while keeping everything else the same.
Logical Structure:
The magazine bases its profit-maximizing strategy on the logic that cutting postage costs (by publishing fewer issues) while maintaining revenue streams (same subscribers, advertisers, and prices) will increase overall profits. The research finding supports this by removing the main risk factor.
Prethinking:
Question type:
Strengthen - We need to find evidence that would make the magazine's profit decline MORE likely to happen, even though their plan seems sound on paper
Precision of Claims
The magazine's plan involves precise quantitative changes: cutting issues by exactly 50% (from 12 to 6 per year), maintaining same total articles per year, keeping subscription prices unchanged, and research shows zero subscriber/advertiser loss
Strategy
Look for hidden costs or revenue problems that the magazine didn't consider in their plan. Even though they're cutting postage costs and keeping customers, there might be other financial impacts from publishing fewer, thicker issues that could hurt profits
This tells us that mailing costs would increase by about one-third per issue under the new plan. However, even with this increase in per-issue mailing costs, the magazine would still save money overall since they're mailing only 6 issues instead of 12. The total yearly postage costs would still be lower than current costs, so this doesn't provide strong evidence that profits would decline.
This discusses subscriber preferences about article quantity versus quality. Since the plan maintains the same total number of articles per year and keeps quality unchanged, subscribers get what they care about most. This doesn't suggest any revenue loss or cost increase that would hurt profits.
This indicates that long-time subscribers would stay even if prices increased. This actually suggests the magazine has pricing power and loyal customers, which would support rather than undermine their profit maximization plan. This doesn't provide evidence that profits would decline.
This is the correct answer. If advertisers spend the same amount per issue (not per year), then with only 6 issues instead of 12, total annual advertising revenue gets cut in half. Since advertising is typically a major revenue source for magazines, losing 50% of advertising income would devastate profits despite any postage savings. This provides strong evidence that the plan would cause profits to decline.
Stable production costs means no additional cost pressures from the manufacturing side. This neutral information doesn't suggest any reason why profits would decline under the new plan. If anything, stable costs combined with lower postage costs would support the profit improvement goal.